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Camp Says Imminent Contractor Tax Repeal Bill Will Be Offset

A bill to repeal a law requiring 3 percent tax withholding on government contracts is “imminent,” said Representative Dave Camp, chairman of the House Ways and Means Committee.

The repeal legislation, which would cost the U.S. government about $11 billion in forgone revenue over the next decade, will be offset so that it doesn’t add to the budget deficit, the Michigan Republican said in a brief interview in the Capitol today.

“The plan is to offset it,” he said.

Camp wouldn’t describe how he will propose to make up for the repeal legislation’s cost or say when a committee vote would occur. He said he was discussing those details with members of the Ways and Means panel.

Congress enacted the requirement in 2006 as a way to prevent tax cheating by contractors. Under the law, the U.S. government, state governments and large local governments would retain 3 percent of contracts to cover future tax liabilities.

In 2009, Congress delayed the implementation date to 2012. Earlier this year, the Internal Revenue Service moved it back to 2013. President Barack Obama included a delay in his recent jobs legislation.

Business groups, including the U.S. Chamber of Commerce and the Associated General Contractors of America, have been urging Congress to repeal the requirement. They contend that it creates unnecessary administrative burdens for companies complying with tax laws.

Cash Flow Problems

“For many businesses the profit margin is often less than 3 percent, meaning that the withholding tax will create significant cash flow problems for day-to-day operations as well as draining capital that could be used for job creation and business expansion,” the Chamber’s chief lobbyist, Bruce Josten, wrote to the committee today. “During these difficult economic times, Congress should be pursing policies that encourage, not hamper, job creation in the private sector.”

The main House repeal bill has 262 co-sponsors, or more than half of the House. House Majority Leader Eric Cantor, a Virginia Republican, has said the House would vote on the bill this year.

The bill is H.R. 674.

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